134. The key to reducing _____ is to distribute the firm’s productive assets to various locations
so the firm’s long–term financial well-being is not severely affected by adverse changes in
exchange rates.
135. Which of the following is a step taken to manage foreign exchange risk?
136. How do foreign exchange markets benefit international businesses?
137. What is meant by carry trade? Why is it risky? Explain with an example.
138. Differentiate between spot exchange rates and forward exchange rates.
139. What is meant by a currency swap?
140. How do the purchasing power parity theory and the law of one price relate the prices of
commodities to exchange rate movements?
141. How does an increase in money supply in an economy lead to inflation?
142. Describe the factors that explain the failure of the purchasing power parity theory to
predict exchange rates accurately.
143. What is the Fisher effect?
144. Explain how investor psychology and bandwagon effects impact the movement in
exchange rates.
145. Briefly describe the schools of thought regarding exchange rate forecasting.
146. Describe the difference between fundamental analysis and technical analysis in
forecasting exchange rate movements.
147. Explain the concepts of transaction exposure and translation exposure.
148. Explain the concept of economic exposure. How is it different from transaction
exposure?
149. Differentiate between a lead strategy and a lag strategy.
150. Briefly describe the tactics and strategies that organizations should use to minimize
foreign exchange exposure.